Note: I’m heading out of the office for the next week and a half, but in my absence I want to offer a couple of blog posts from the Social Velocity archives. The one below appeared on the blog in February 2011. Enjoy!

I’m a huge believer in questions. Sometimes asking good, hard questions is the only way to get to the bottom of something, to analyze potential options, to find the right path.

So too in the nonprofit sector hard questions can play a pivotal role. It is critically important that we move away from an unwritten rule that “charities” are doing good things that shouldn’t be questioned, to a place where nonprofits are continually asking themselves whether they are making most effective use of resources and providing real solutions.

These are the 5 questions I’d like to see nonprofits asking themselves:

Do we know if we are accomplishing anything? Because nonprofit organizations can’t simply look at a profit and loss statement to see progress, determining success is much more difficult than in the for-profit world. Yet a nonprofit organization cannot just translate community resources into activities and call it a day. Nonprofits are increasingly forced to demonstrate the change their work creates in the community. I’m not suggesting that every nonprofit must conduct large evaluation projects. Rather, I’m arguing that a nonprofit must create a solid strategy for creating change and then find a way (as cheaply and simply as possible) to determine whether they are delivering on that strategy.

Are we adapting to our external environment? Gone are the days when a nonprofit enjoyed a core group of donors that funded delivery of the same services to the community year after year. In this ever-changing, increasingly fast-paced world, nonprofits must constantly analyze the trends in their external environment (funding, competitors, community needs) and effectively adapt to those trends in order to survive and thrive.

Is our board helping or hurting? A board of directors can be a nonprofit’s most important asset, expanding its footprint in the community, bringing in resources, driving a bold direction, ensuring accountability and transparency. Or it can be a group of people who show up to network, meddle in minutiae, and bog the organization down. A nonprofit’s board needs to take a hard look at itself, as individual members and as a group, to determine if they are an effective governing body or not, whether they are moving the mission forward, or just getting in the way.

Do we really need that new building? Time and again nonprofit organizations launch a capital campaign as a way to get their name out in the community, get the board motivated, bring big donors in the door, and seek significance and importance. But the result is often an organization crippled by resources draining away from the mission. Board and leadership needs to ask themselves if a new building is directly tied to achievement of mission. There are other, better ways to build your brand, rally the board and donors, and raise big dollars, like a growth or capacity capital campaign, which can actually result in more social impact and financial sustainability over the long term.

Are we using money as a tool? Nonprofit boards often shy away from discussions about money, ignoring tools like financial reports, budget reviews and fundraising net-revenue analysis, in order to focus meetings on programs and mission. But money is an incredibly effective tool for making programs and mission happen, and nonprofits need to create and implement an integrated financial strategy that feeds into the overall organization’s plan. Money, if used strategically and effectively, can help your nonprofit do so much more.

To move forward, the nonprofit sector needs to do away with safe, routine conversations and start asking some hard questions. Indeed questions are sometimes the only route to open up possibilities, try new approaches and find a better way.

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About the Author: Nell Edgington is President of Social Velocity (www.socialvelocity.net), a management consulting firm leading nonprofits to greater social impact and financial sustainability. Social Velocity helps nonprofits grow their programs, bring more money in the door, and use resources more effectively. For more information, check out Social Velocity consulting services and clients.